The RLTA Makeover: Intent to Regulate the Private Market

April 28 brought the 2019 legislative session to a close. After 105 days in session, lawmakers, staffers, and lobbyists alike were ready for sine die, and many in the housing industry were eager for a reprieve from the beating they took on the Hill this year. By the last day of session, the 2019 Legislature substantially amended key components of the Residential Landlord-Tenant Act (RLTA) pertaining to notice periods around rent increases, termination of tenancy under certain conditions, and unlawful detainer. Moreover, lawmakers enacted unprecedented changes to the legal eviction process in residential tenancies.

Rental housing advocates hit the ground running in early January opposing shoddily conceived bills sponsored by Representative Nicole Macri (D-43) and Senator Patty Kuderer (D-48). The “eviction reform” legislation dropped by Representative Macri (i.e. EHSB 1453) and Senator Kuderer (i.e. ESSB 5600) dramatically increase the pay or vacate notice period, automatically converting term leases into month-to-month tenancies, eliminating a rental owner’s ability to collect attorneys’ fees in eviction cases, or late fees in evictions, among other amendments. In conjunction with the eviction reform bills, Representative Macri and Senator Rebecca Saldaña (D-37) proposed bills to enact statewide “Just Cause” which would only allow a rental owner to terminate a tenancy outside of non-payment of rent or behavior for a specific group of reasons similar to Seattle’s Just Cause (e.g. sale of property, owner moving into property, etc.); otherwise, a tenant could remain in a unit in perpetuity, or until the tenant decided to leave the unit.

RHAWA and other industry advocates were successful in stopping “Just Cause” legislation and other onerous and ineffective policies in this year’s legislature. The two “Just Cause” bills that rental housing advocates killed this session include HB 1656 (sponsored by Representative Macri) and SB 5733 (sponsored by Senator Saldaña). If passed, “Just Cause” would have established a Seattle style statewide policy for legally allowable terminations of a month-to-month tenancy.
In addition, industry advocates were able to stop the legislature from requiring mediation before moving forward with an eviction proceeding, remove a proposed change to RCW 59.18.220 in ESSB 5600, which would have automatically converted term lease agreements to month-to-month agreements at the expiration of a lease, and stopped a bill that would require landlords to accept installment payment plans on move-in fees and deposits.

While the salient policy that emerged from the eviction reform bills is increasing the notification period for nonpayment of rent, the bills also alter many other segments of the eviction process and the landlord-tenant relationship. ESSB 5600 and ESHB 1453 both limit the amount of attorney's fees and late fees allowed in an unlawful detainer judgment, create a definition of rent that separates recurring fees and utilities in the rental agreement from other fees and costs, require that landlords apply payments to rent first before other costs and fees, limit a landlord’s ability to bring an eviction for charges other than rent, and create new processes in eviction law for tenants to reinstate a tenancy through judicial discretion payment plans for nonpayment of rent.

The efforts of the RHAWA government affairs team alongside other rental housing industry advocates led to some amendments in the stakeholder process including the creation of a fund out of the state capital budget to pay off eviction judgments that receive judicial discretion reinstatement. The money will allow landlords to take their judgments for nonpayment of rent to the Department of Commerce for payment. While many of the regulations in these bills will be burdensome on housing providers, some legislators understand that housing affordability for rent burdened tenants is a societal issue that must be addressed with significant public and private funding.

By the close of the legislative session it was Senator Kuderer’s, ESSB 5600, that passed through both chambers and was signed by the Governor on May 9. ESHB 1453 passed the House in a contentious vote when three Democrats broke with their caucus and voted no, along an otherwise party line vote. After moving over to the Senate, ESHB 1453 later died in a Rule’s Committee. The substantive policies reflected in the statewide law imposed on landlords and tenants by ESSB 5600 include:

• Amending the eviction process in several and creates a fund to pay monetary judgments for reinstated tenants
• Extending the notice period for a pay or vacate notice from 3 to 14 days, before a landlord can file a summons and complaint for an unlawful detainer. Nothing in the bill language mandates a grace period before a landlord can issue a pay or vacate notice for nonpayment in a particular month.
• Creating a definition of ‘Rent’ that includes recurring charges in the rental agreement, and utilities. The definition excludes non-recurring charges (e.g. deposits, damage fees, late fees, and attorneys’ fees). Security deposit payment plans are specifically allowed under the definition of rent.
• Preventing a landlord from obtaining a writ of restitution to remove the tenant from the unit for charges that are not contained in the new definition of rent, although they are still owed by the tenant and may be pursued in other civil actions.
• Placing a standard form pay or vacate notice in statute, modernizes the language of the standard form Summons and Complaint, and requires the Attorney General’s office to maintain a website that contains common notices in multiple languages and provides reference to tenant legal services.
• Removing the requirement for a court order to serve an unlawful detainer summons and complaint by posting. The landlord may now post the summons and complaint after three attempts at personal service. The judge will address the issue of appropriate service before entering a judgment. Service by posting still only allows for a writ of restitution and does not create jurisdiction for monetary judgements.
• Removing language requiring the tenant to place the amount of a monetary judgment into the court registry in order to stop execution of a writ of restitution.
• Caps the amount of money that can be awarded in a monetary judgment for unlawful detainer to $75. All late fees are owed and may be pursued in other civil actions.
• Creating standards by which a judge can award reasonable attorneys’ fees. If the parties appear for a show cause hearing, the judgment must be for an amount more than 2 month’s rent, or $1,200 (whichever is greater) for the judge to order reasonable attorney’s fees. If the tenant files a motion for reinstatement, attorneys’ fees for the proceeding may be awarded if the tenant is reinstated but may not be awarded if the tenant is not reinstated by the court.
• Allowing for a tenant who has had a judgment finding them guilty of unlawful detainer to request that the court reinstate the tenancy and set up a payment plan for the tenant to pay off the monetary judgement. Current law allows for reinstatement of tenancy if the tenant is on a rental agreement, and the tenant pays the monetary judgement in full within five days.
• If the tenant makes this request of the court, the judge must apply seven factors to determine reinstatement and terms of any payment plan. The judge may take into account for the tenants willful failure to pay rent, whether the nonpayment was caused by an exigent circumstance that is not likely to recur, the tenant’s payment history and ability to timely pay the judgment, whether the tenant is otherwise in substantial compliance with the rental agreement, the tenant’s hardship if evicted, and conduct related to other notices within the last 6 months. Reinstatement through judicial discretion can only be ordered for nonpayment of rent, and not for other violations of the lease agreement. A tenant may not be awarded reinstatement if the tenant has received three pay or vacate notices within the last 12 months.
• Any payment plan for the monetary judgement between landlords and tenants must be paid off in 90 days. The bill creates a $50 penalty to the tenant for each subsequent unlawful detainer after reinstatement has been awarded.
• The tenant must pay off one month’s rent in the monetary judgment within five business days in order to be eligible for the plan. The tenant must then pay the cumulative amount of at least one month’s rent within 30 days of the reinstatement. The tenant then must pay the cumulative amount of at least one month’s rent within 60 days of the reinstatement. The tenant must then pay the balance within 90 days. If the tenant defaults on any of these benchmarks to the payment plan, the landlord may execute the writ of restitution from the original unlawful detainer with 3 days’ notice to the tenant.
• The tenant must also stay current on new rent owed during the payment plan period or the landlord may also execute the writ from the unlawful detainer. If the judgment is ordered after the 15th of the month, the tenant has the option to prorate the first month’s new rent into the payment plan, under the existing benchmarks for timely payments.
• Landlords will be able to submit a request to have the entire monetary judgment paid by the Department of Commerce Landlord Mitigation Program. After submitting the application, the Department of Commerce will take 30 days to approve the claim, and another 15 days to pay the landlord. The tenant will then be responsible to pay back the state, independent of the landlord-tenant relationship.
• If there is insufficient funds in the Landlord Mitigation Program for the payment of the monetary judgment, the landlord may execute the writ to remove the tenant, and may hold the request for payment to be paid by the state on a first come, first served basis, when the fund is replenished.
• The 2019 State Legislature has appropriated $1 million dollars in the capital budget for the Landlord Mitigation Program payment of monetary judgments that have received judicial discretion reinstatement. Future legislatures will need to appropriate further budgetary funds in the supplemental budget process and in further budget cycles.
• The bill passed the Legislature on a party-line vote and will go into effect on July 28, 2019.

RHAWA and other industry advocates continue to argue that these increased regulations will create further cost burdens on landlords who have not received rent owed, and those costs will be reflected in increased rents for tenants. And with all the intense focus on the eviction process by the advocates for ESSB 5600, there has been little discussion about the deeper issue of rent burden that causes tenants to fall behind in rent. Individual RHAWA members and our government affairs team attended public hearings, and participated in stakeholder meetings, and private discussions with key lawmakers to educate them on the critical role small landlords play in the affordable housing matrix, and our limited ability to bear drastic increases in operational costs.

The bill also contains some practical educational and plain-language updates to the RLTA that the industry supports, like setting out the standard form of the “pay or vacate” notice in statute, requiring state government to offer translations of critical notices from landlords to tenants in several languages, and updating the form of the summons and complaint for an unlawful detainer to be better understood by all parties.

Beyond ESSB 5600, other new RLTA laws and changes stem from the passage of HB 1440 (sponsored by Representative June Robinson (D-38)) which is a new statewide law that changes the increase in rent notice for month-to-month tenancies from 30 days to 60 days for any amount of rent. In HB 1138, (sponsored by Representative Cindy Ryu (D-32)) the RLTA language updates the regulatory framework around the legal termination of a lease agreement by a member of the Armed Services. It requires a member of the Armed Services to give a 20-day notice to their landlord if they need to break their lease obligation under specific circumstances. Finally, HB 1462, (sponsored by Representative Andrew Barkis (R-2)) requires a landlord give 120 days’ notice for termination of a month-to-month tenancy when the termination is for the property to be substantially rehabilitated, has a change of use, or is demolished. Substantial rehabilitation is defined as, “extensive structural repair or extensive remodeling of premises that requires a permit such as a building, electrical, plumbing, or mechanical permit, and that results in the displacement of an existing tenant”. Change of use is defined as conversion from residential to non-residential, or to another form of residential use. Displacing a tenant due to an owner or their immediate family occupying the unit does constitute a change of use. A property owner in violation of the policy is liable in a civil action up to three times the monthly rent. All these bills will take effect July 28, 2019.

Although the 2019 legislative session proved to be a tough battle ground for the rental housing industry, rental housing advocates were able to prevent some particularly onerous pieces of legislation from becoming law this year. The rental housing advocate team also helped draft HB 1462, a new law that seeks to address the specific issue of displacement, which will prevent situations like The Tiki from happening again.

As for the outcome of substantive pieces of ESSB 5600 and the litany of statewide regulations imposed on rental housing owners across the state, the law takes effect in July. What proponents of the bill predict will create protection and housing stability, especially for renters in financial turmoil, may find that the application of a policy designed in an echo chamber is inferior to the policy it replaced.